Best in Energy – 7 September 2022

California warns of possible power cuts

European smelters call for emergency help

(see letter from Eurometeaux trade group)

EU banks prepare to cut electricity demand

EU reverts to coal generation in crisis ($FT)

U.S. LNG export capacity

CALIFORNIA’s power grid is running short of capacity in the early evening when consumption, driven by air-conditioning, is past its late afternoon peak but still high and solar generation is rapidly fading. The load curve below for September 6 shows the strain on dispatchable generating capacity between around 1600 and 2100 hrs local time. The California Independent System Operator (CAISO)’s forecast curve shows the same problem is expected today on September 7:

BRENT spot prices and calendar spreads are consistent with a market that is still tight but past its cyclical peak. The six-month calendar spread has softened to a backwardation of $5.60 per barrel (97th percentile) from a record of more than $21 in the immediate aftermath of Russia’s invasion of Ukraine in early March. The spread from December 2022 to December 2023 has softened to a backwardation of under $10 from a peak of $16 in early June. Softening spreads reflect an increased probability that a cyclical slowdown in the major economies will cut consumption and lead to an accumulation of inventories over the next year:

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